UPDATE 1-Chile stocks up 1.5 pct on economic data

By Aaron Nelsen

SANTIAGO, Oct 29 (Reuters) - Chile's stocks surged on Thursday, advancing in line with global bourses and a host of positive economic news, analysts said.

Chile's benchmark IPSA index .IPSA erased Wednesday's losses to close 1.51 percent higher at 3,372.02, while the all-market .IGPA rose 1.26 percent to 15,868.05.

"The retail and consumer sectors were the most dynamic today, lifted by positive economic data locally and abroad," said William Baeza, financial analyst for Euroamerica Corredores brokerage.

Earlier in the day Chile's National Statistics Institute announced September industrial output fell by a greater-than-expected 5.2 percent, however, unemployment for the three-month period ending in September fell to 10.2 percent from 10.8 percent.

"It's encouraging the stimulus incentives that have been placed by the government and by the central bank are definitely having an impact on the sectors that are most linked to the domestic economy," said David Duarte, a Latin American analyst at 4Cast Inc. in New York.

Lifting the IPSA higher was Chile steel and iron ore producer CAP CAP.SN, surging nearly 5 percent to close at 14,374 pesos, while Chilean forestry group CMPC CAR.SN, closed 3.7 percent higher at 19,702 pesos.

And Chilean retailer La Polar LAP.SN, climbed 3.3 percent to close at 2739.6 pesos.

Chile's peso CLP=CL closed nearly unchanged on market volatility amid a busy week of local company earnings reports. The peso fell slightly to 531.00/531.50 per dollar from Wednesday's close of 530.70/531.00.

The peso has nearly recovered the 22.3 percent it lost against the greenback in 2008 during the worst of the financial crisis last year. (Writing by Aaron Nelsen; Editing by Diane Craft)